Economics Lesson 1

Read the sentence. When setting financial goals, it is important to set SMART goals. What does the acronym SMART stand for?

Specific, Measurable, Attainable, Relevant, Timely

Why is it important to use multiple methods of both broadcast and online media advertising?

Using multiple methods allows for wider exposure to advertise the product or service.

Which are advantages of credit? (Select all that apply.)

You make one monthly payment. You can buy items now and pay for them later.

What will happen if you avoid a review of your monthly budget?

You will have no record to keep track of where your money is going.

Read the sentence. Sandy wants a new bed but does not want to pay for it right away. Which is her best option?

a credit card

Read the scenario. Rachelle is saving for college and does not want any student loans. She already has $22,000 but needs to get to $23,000. She has the choice of a bank savings account with 1.5 percent interest for 3 years, a certificate of deposit at 3.5 percent interest for 18 months, a credit union savings account at 2 percent for 2 years, or a savings bond at 1 percent for 5 years. Rachelle is beginning her sophomore year and is on track to start college in 3 years. Which is her best choice?

bank certificate of deposit

Which tax is the main source of revenue for the federal government?

income

Which form is used by employers to withhold the proper amount of income tax from employees' paychecks?

W-4

Read the scenario. In the simple interest formula, I=Prt, Robert needs to calculate total monies earned on a savings account with the following information: principal = $4,000; interest rate = 2.5 percent; and time = 7 years. What is the total money in the account?

$4,700

Read the scenario. Bill applied for a payday loan. His loan amount was $300 and included a $50 fee. However, he could not repay his loan when it was due. He rolled over the loan two times, and each time it cost $45. How much did Bill spend to repay the entire loan?

$440

What is overdraft protection?

a service that prevents checking account holders from accidently bouncing a check

What is creditworthiness?

an appraisal made by a lender as to how likely a customer is to repay a loan as agreed

What are the most common fixed expenses for the majority of people? (Select all that apply.)

automobile loans house payments

Which items are typically included in a monthly budget?

income, fixed expenses, and variable expenses

Comparative advertising includes which of the following criteria? (Select all that apply.)

increased quantity additional features better price

What is the most important factor in maintaining a high credit score?

making payments on time

Why do the credit reporting agencies track data on consumers?

to help a lender decide whether a person is a good credit risk

Why must you make adjustments to your budget if your income changes? (Select all that apply.)

to maintain an understanding of the amount of money you have available to ensure that your expenses and income remain balanced

Read the sentence. Jennifer wants to use her tax refund to pay off her credit card balance. How much money would Jennifer receive if her withholdings and exemptions are 100 percent accurate?

$0

Read the scenario. Maxine needs to balance her checkbook. She has a starting balance of $1,237 in her checking account. She received a $25 check for her birthday. She used her debit card to pay $115 for a haircut and manicure. She then purchased books for her classes for a total of $397. She wrote a check for $350 to pay her car loan as well as a check for $80 to pay her cell phone bill. She withdrew $50 from an ATM machine and paid a fee of $2. Maxine then put half of the remaining money in her checking account into her savings account. How much money did Maxine put into her savings account?

$134

Read the scenario. Debbie needs to know how much she will pay on her car loan. Using the simple interest formula, how much will she pay with a principal balance of $12,000, an interest rate of 5 percent, and a 60-month loan?

$15,000

Read the scenario. Ricky wants a new car that costs $15,000. His credit union will give him a loan at 4.75 percent for 4 years. What is the total cost Ricky will spend?

$2,850.00

Read the scenario. Heathcliff is balancing his checkbook. He starts his ledger with the $145 he has in his account. He records $27 spent at the grocery store followed by $58 spent on his cellphone bill. Then, he receives $540 from work. He then spends $54 at a restaurant and $38 at the movies. He deposits a check from his parents for his birthday worth $180. Then, his landlord cashes his check for rent for $600. How much did Heathcliff spend at the grocery store and for his cell phone?

$85

What does a high credit score tell a lender?

A high score suggests a person is very likely to repay debt.

How does the length of credit history impact a person's credit score?

A longer history has a positive impact.

What is the function of credit cards?

Credit cards enable individuals to borrow against their line of credit to purchase goods and services.

Which accurately describe differences between debit and credit cards? (Select all that apply.) Debit cards charge interest after a 30-day grace period, whereas credit cards do not charge interest. Debit cards deduct funds from a person's banking account, whereas credit cards pull money from a predetermined line of credit. Credit cards deduct funds from a person's banking account, whereas debit cards pull money from a predetermined line of credit. Credit cards charge interest, whereas debit cards do not charge interest.

Debit cards deduct funds from a person's banking account, whereas credit cards pull money from a predetermined line of credit. Credit cards charge interest, whereas debit cards do not charge interest.

Which is an example of a SMART financial goal?

I want to save $25 dollars per week by packing my own lunch in order to pay off $100 in credit card debt in the next 30 days.

Read the scenario. Anton needs financial management help to better invest his money. He wants to set up some certificates of deposit and mutual funds, as well as purchase stock in local companies. He knows he can go to his local bank and speak to a professional. Which bank official will best assist Anton with his needs?

INCORRECT broker

Jim wrote a check for $30, but he only had $25 in the bank. What is Jim's account balance?

It is -$70 to cover the cost of the check and the overdraft fee.

What is true of a savings account?

It is a low liquidity asset that receives a moderate return in interest.

What is a purpose of the Federal Deposit Insurance Corporation (FDIC)?

It protects consumers from losing their money if a bank fails.

What are the three largest credit reporting agencies?

TransUnion, Equifax, and Experian

What are typical fees associated with checking accounts from banks without any branches? (Select all that apply.) account minimum fees day-trading fees overdraft fees ATM fees

account minimum fees overdraft fees ATM fees

Which best explains product advertising features?

advertising that focuses exclusively on the benefits of the product

Read the scenario. April wants to open checking and savings accounts. Her mom told her to be careful because banks charge fees that can really add up. Before she opens the account, April decides that she should research the fees the banks near her house charge. Which are fees that banks charge account holders?

minimum balance fees ATM fees overdraft fees

Which are considered fixed expenses?

rent, cable TV, and car insurance

Read the scenario. Zoe is preparing her monthly budget. She lists her income from her job. She then starts to list her expenses. Her first list of expenses includes food, entertainment, clothes, and gas. What type of expenses are on Zoe's list?

variable

Read the scenario. Brenda took a student loan for $24,000. She is paying 2.25 percent on an eight-year loan and has paid off $18,000 so far. How much does Brenda have left to pay?

$10,320

What is a benefit of creating a budget?

A budget enables you to learn how to live within your means.

Which accurately describe differences between credit and debit cards? (Select all that apply.)

Credit cards pull money from a predetermined line of credit, whereas debit cards deduct funds from a person's banking account. Credit cards charge interest, whereas debit cards do not charge interest.

Read the scenario. George is 22 years old, single, and has just started his first job. He saves 5 percent of his monthly income for retirement. Kirsten is 30 years old and married with two children. She will start saving 6 percent of her income for retirement when she turns 35. Which person will have more money at age 65 if all other factors are the same?

George will because he is younger and saving for a longer period.

Why is cooperative advertising the most common form of advertising used by wholesalers and manufacturers who jointly advertise a product? (Select all that apply.)

Large quantities can be held in stock. Tracking of sales is easier and more productive. It allows for sales at a discounted price. Incorrect 75%

Which is best defined as "the borrowing of money to make purchases now and paying the money back later"?

credit

Which questions are asked on the W-4 form? (Select all that apply.)

whether you are a dependent or independent whether you are single or married whether you are a head of household

What would count as a negative against your credit score?

a payment made more than 30 days past due

What does a high credit score indicate?

a person who has a history of repaying debts on time

What is a budget?

a plan for spending your money to meet your wants and needs

What type of card is issued by a credit union or bank and allows the user to purchase goods and services electronically by deducting funds directly from his or her checking account?

debit card

Which best defines disposable income?

income available after taxes and other mandatory expenses

Which is the best example of direct vendor advertising?

a commercial during the Super Bowl for Starbucks coffee

Read the scenario. Paul is 16 years old and has a job at the local grocery store. He has a savings account and a driver's license. Why is he not eligible for a payday loan?

He must be at least 18 years old and have a checking account.

When should you start planning for retirement?

You should start planning as soon as you decide on a career path.

Read the scenario. Allen is balancing his checkbook. He starts his ledger with $98. He deposited a paycheck of $453 from his first job and a paycheck of $127 from his second job. He spent $114 at the grocery store and bought $20 of gas. He then paid the minimum due on his credit card, which was $40. He also paid his electric bill for the month, which was $120, and his water bill, which was $68. Finally, Allen transferred $75 from his checking account to his savings account. How much money does Allen have remaining in his checking account?

$241

Read the scenario. Jan has auto insurance with a $250 deductible. When she is in a hit-and-run accident, she learns that the repairs will cost $4,500. What will Jan's out-of-pocket expenses be?

$250

Read the scenario. Miguel opened his first checking and savings accounts. Since Miguel now has checking and savings accounts, he will not have any fees. If he uses a STAR-ATM, he will not be charged a fee. However, if he uses a regular ATM, there will be a $2 fee for each use. Miguel starts with a balance of $65. He wrote a check to his cell phone company for $45. For his birthday, Miguel's family members sent him three checks for $20, $50, and $20. He then received a paycheck for $1,050 through direct deposit. He wrote a check for $305 for his car payment and a check for $95 for his car insurance payment. Miguel then used his debit card to pay his $116 electric bill. Finally, Miguel wanted to go to dinner and the movies with friends, so he withdrew $80 from a STAR-ATM. What is Miguel's balance?

$564

Read the scenario. Heathcliff is balancing his checkbook. He starts his ledger with the $145 he has in his account. He records $27 spent at the grocery store followed by $58 spent on his cellphone bill. Then, he receives $540 from work. He then spends $54 at a restaurant and $38 at the movies. He deposits a check from his parents for his birthday worth $180. Then, his landlord cashes his check for rent for $600. How much did Heathcliff earn from work and for his birthday?

$720

Which accurately describes a push marketing tactic to help manufacturers sell more products?

A manufacturer offers department stores incentives for selling its product.

What is the process for qualifying for a payday loan?

A person must possess an active checking account, valid identification, and be at least 18 years old.

Read the scenario. Alfonso is 19 years old and has a high school diploma. Recently, he was promoted to assistant manager at the fast-food restaurant where he has worked since the age of sixteen. His dream is to become the restaurant's manager. What is his best option for achieving his dream?

He should attend classes at the local college to receive training in management.

What is true about the risk and return of an investment?

Higher-risk investments offer the potential for a higher return.

Which are disadvantages of credit? (Select all that apply.)

If you are late making payments, interest rates can increase. If you fail to make payments, you can hurt your credit score.

How does the government protect investors?

It oversees the buying and selling of securities so that consumers are not taken advantage of by businesses.

Read the scenario. Mia has had five credit accounts for 10 years. She has a debt of $2,000 and makes all of her payments on time every month. Sal also makes timely payments on his similar debt. Sal has had credit accounts for two years. Based on the information, who has a better credit score?

Mia has a better credit score because she has managed debt for a longer period of time.

Which are accurate regarding debit card reward programs? (Select all that apply.) Some debit card reward programs offer to eliminate overdraft protection fees. Some debit card reward programs offer cash back at select retailers. Most debit card reward programs are more lucrative than credit card reward programs. Most debit card reward programs are less lucrative than credit card reward programs.

Some debit card reward programs offer cash back at select retailers. Most debit card reward programs are less lucrative than credit card reward programs.

According to the Monthly Budget worksheet, how does a person determine how much money he or she has available to put in savings?

The person subtracts total expenses from total income.

What is an advantage of credit unions?

They are nonprofit institutions, and their primary concern is the member.

Read the scenario. Bill recently moved into a new apartment. He wants to purchase a new television. Bill needs to decide between paying cash for a traditional model television or using credit for a newer HD version. Which are disadvantages of using credit? (Select all that apply.)

Using credit may tempt Bill to buy more than he can afford. Using credit will cost Bill more money over time.

How is whole life insurance different from term life insurance?

Whole life insurance does not expire, whereas term life insurance does.

If you find an error on your credit report, what is your best option?

You should contact all three agencies with proof of the error so that they can fix it.

How do you benefit from understanding personal finance? (Select all that apply.)

comprehending the difference between debit and credit cards making quality choices about money by creating and managing a budget

Read the description. This is a plastic card that provides access to an account. It can be used to make purchases at a wide variety of stores, restaurants, or other businesses. The holder can make deposits into their account. Money can also be withdrawn from the account as long as the amount withdrawn does not exceed the balance. Which product is described?

debit card

Read the sentence. In addition to checking and savings accounts, many banks offer other services that assist customers in using and managing their money wisely. What are some of the services that customers may use?

direct deposit, mutual funds, and online banking

What is disposable income?

income that is available after taxes and other mandatory expenses have been paid

Which are part of the marketing mix? (Select all that apply.)

know what people will pay have the proper packaging Incorrect 67%

What is the meaning of the word economics?

laws for the home

Where would you find the most useful information about post-secondary education and training? (Select all that apply.)

military and school websites Department of Education

Which are offered by joining the military after high school? (Select all that apply.)

receive training while earning a salary receive tuition assistance after serving a certain number of years

Read the scenario. Paul is 18 years old and has never had a banking account. He has a job and wants to start saving money to buy a car. What are some important things Paul should consider before opening an account? (Select all that apply.)

the types of services he will need whether the financial institution has government oversight

Read the scenario. George is saving for a mortgage on a $125,000 house. He needs 20 percent for a down payment. He currently has $22,000. How long will it take George to save the rest of the money when he earns 5 percent interest per year?

three years

Which describes the best use of a checking account? to earn dividends to access cash to earn capital gains to accrue interest

to access cash

What is the purpose of credit? (Select all that apply.)

to provide customers with the opportunity to purchase and consume goods and services and to pay at a later date to provide customers with a powerful tool for creating personal financial success and success in business

Read the scenario. Elizabeth has a checking account at a local bank. The bank charges account holders $5 at the end of the month if their account falls below $1,000. The bank also charges $35 at the time of an overdraft and $2 for every ATM use. Elizabeth has $43 in her checking account when she begins balancing her checkbook. She received a paycheck for $216 and a check from her parents for $50. She wrote a $45 check to pay her cell phone bill and a check for $117 to pay her electric bill. She also wrote another check for $110. She used an ATM twice, withdrawing $20 each time. Two weeks later, Elizabeth received her next paycheck for $197 and another check from her parents for $50. What is the current balance in Elizabeth's checking account?

$200

How do individuals benefit from creating a budget?

It helps them devise a plan to save money. It helps them identify their expenses. It helps them identify their income.

Which type of loan requires the borrower to write a postdated check for the amount he or she wishes to borrow, in addition to a fee, in exchange for cash?

payday loan

On average, who earns the highest salaries?

people with a professional degree

Which items make up the marketing mix?

place, price, promotion, product

What are the four Ps of marketing (also known as the marketing mix)?

product, price, promotion, and place

Read the scenario. Sally needs to pay her bills this month. Her bills include rent, utilities, groceries, concert tickets, airfare, car insurance, a car rental, and a trip to an urgent care facility. What are Sally's fixed expenses?

rent and car insurance

Which is the best reason for why companies use product advertising features?

to focus on a specific benefit

Which accurately describe features on a credit report?

a person's credit account information, such as lines of credit from credit cards a person's personal information, such as date of birth and Social Security number a history of delinquent payments

What do credit unions offer that banks do not?

memberships

Which type of loan is also known as a cash advance loan or a deferred deposit loan?

payday loan